2018: Wishing You a Year of Growth and Prosperity

1 Jan , 2018

The General Sherman Giant Redwood (Sequoiadendron giganteum) is the largest currently standing tree in the world, by volume, towering over 275 feet tall, supported by a 36-foot base diameter, and estimated to have sprouted at about the time of Christ’s birth. It can be found in Sequoia and Kings Canyon National Park in California. A giant in size, it is a mere moderate in age, among its peers, where old for other giant redwoods is over 3,200 years of age. Named for General Sherman, the union general, that brought both emancipation to slaves and destructive burning to the South, it reminds me that in its 2000 years of history, it has seen both good and bad, much as the general for which it is named, surely saw, both in his military service. The survival of such a giant tree also reminds me that it surely lived through forest fires, droughts, ice storms, and other stressful periods. Yet, it survived and flourishes today. It’s size and success are a sign of its resiliency in times of stress, and it has been a witness to good and bad. In our lives, surviving and prospering requires recovering from stressful periods, and dealing with good and bad, too. Indeed, after a 2017 that brought the US wildfires in the west and hurricanes on the coasts and senseless shootings in multiple cities, I hope we can all experience prosperity, in 2018, and growth as so beautifully displayed by the General Sherman Giant Redwood, which has overcome its own stressful periods to be the prosperous giant of today.

Here are some business outlooks and some predictions for the New Year!

Amazon

Investors seem quite comfortable with Amazon’s continued growth with minimal profit (reinvestment of profits in the business). 2018 will bring new reaches and accomplishments for this great company. Investments in aircraft, millions of installations of Alexa, a growing reach of Amazon Business (ordering for business firms), some 238 cities vying for HQ2, and a series of retail closures that will only continue into 2018, I expect more great things from Amazon. Go long on AMZN.

NFL

2017 was a rough year. Bad play, bad social stands, bad patriotism, bad calls by refs (except for the Patriots) and bad actions by owners (and some players). Well, I think the NFL is in a funk. Pax NFL should be broad and bright. Instead, it suffers from its privilege and popularity. The NFL needs a Cinderella story and something special to follow, like the Cubs of 2016 in baseball. It would help the NFL a great deal to link its owners and players to real human stories of success, such as savings lives, fighting cancer, helping immigrants, overcoming social discord, and well, helping those that need help, not just billionaire owners and millionaire players. Until it does something that draws people together, I expect much more controversy. I did like the end zone celebrations. That was fun!

US Economy

The US economy is certainly growing. Inflation and real US median household income (corrected for inflation) are still lacking (not growing as expected), but firms are investing and will be encouraged to do more, given the tax rate reduction for corporations. Consumers are spending. Still, economic growth is varied. High tech centers are really experiencing growth. State and municipal taxes are drowning places like Illinois, Massachusetts, and New York, which are all experiencing income and population flight. 2018 will amplify the winners and losers, and so will the new tax code. Get ready for more disparity in the economy, especially by states. I expect two interest rate increases in 2018 by the Fed and continued low unemployment (but modest to little income growth except at the high-income levels). All of this suggests that equity markets (in spite of high evaluations) will continue to expand.

Democrats

The amazing senatorial win in Alabama suggests that Democrats will roll in 2018. I see them gaining some seats, but not enough to take over the senate and house. The Sander-Clinton-Warren divide will make democratic messaging difficult. Success in the economy will help Trump and the GOP. Democrats can only win with attacking the character of GOP candidates. That was easy in Alabama with Moore. It will be hard to scale and repeat in other districts and states. The democrats have many Senatorial seats to defend that are in right-leaning states. Plus, expect Trump to blow-up some DOJ Clinton scandal just in time for the fall elections, tying democratic candidates to another party scandal. There is a lot of powder left in that cannon. Expect modest but not transformational gains by the democrats in the mid-term elections.

US Supreme Court

Three justices will be older than 80 in 2018. God Bless! Each has surpassed the average life expectancy for Americans and their respective gender. The numbers suggest a replacement in the near future is very likely. It will certainly frame the 2018 elections. I see a judge being replaced in 2018.

North Korea

As dangerous as it all seems, I think the US is experiencing success in pressing North Korea. A pig squeals when you poke it. The same is true in dealing with a rogue nation. The launches are signs that sanctions are hurting them, a lot. The sanctions and UN participation have never been stronger, although not complete. It must be hurting North Korea. They just announced a willingness to speak with South Korea. With the Winter Olympics in South Korea, there is an opportunity for North Korea to cause a spectacle, but it would only bury them deeper in the international scene. The path will be rocky, but the international focus is finally there to deal with North Korea. I am optimistic that progress will be made, even if remains in the background.

Chipotle

I wrote about the challenges at Chipotle in a case study. New food borne-illness cases came out in 2017, after a horrific 2015 and 2016. With lumpy queso, and food with E. coli, I think the Chipotle board should consider new restaurant themes for their locations. The many pizza, pho, sushi, Italian, and Mediterranean joints that have adopted the fresh-in front of you, Chipotle model are killing it. In the process, they are killing the burrito baron. Move on Chipotle. Expect more challenges next year. Start to re-purpose and diversify some of your restaurants.

Consumer Debt

Consumer borrowing has returned. Credit card borrowing has increased to record levels and so have student loan and auto lending. A strong economy makes this all possible, but real US median household incomes is still lagging, and many communities are struggling with modest real estate growth since the 2008 crisis. I think we will see economic growth in select communities and challenges with auto lending debt in 2018. Expect auto sales issues and bank stocks to pull back in the fourth quarter of 2018.

Sears

They announced in recent communications that they might not be able to continue as a going concern. I think 2018 is the end of Sears. Who else will lend to them? Plus, some of that real estate might be worth tapping for development. When will the creditors demand access to that? Sooner than later, I think.

Trans-Atlantic Travel

With the entry of low-cost carrier Norwegian to the US-Europe, trans-Atlantic market, it is now commonplace to find round-trip tickets to Europe for $400-$500 and sometimes even less. This is great for vagabonds and the wanderlust alike. It does not sound so great for the US airlines (who enjoyed higher rates in recent years), but does sound great for hotels. Expect great deals to Europe. Plus, Norwegian flies new aircraft. It will challenge the US and European carriers. Book a trip to Europe in 2018! Plus, it is hard to believe the US dollar will have another record retreat against the Euro, as it did in 2017. Expect the US dollar to strengthen somewhat, making your European trip a better deal!

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About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. His most recent book, From Big Data to Big Profits: Success with Data and Analyticsis published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management(World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.

Professor Walker has developed and taught executive programs on Enterprise Risk, Operational Risk, Corporate Governance, Analytics and Big Data, and Global Leadership. He founded and teaches the Analytical Consulting Lab, Risk Lab, Global Lab, and Digital Lab, all very popular experiential learning classes at the Kellogg School of Management, which bring Kellogg MBA students together with corporate opportunities focused on data and strategy. He also teaches courses in risk management, analytics, and on strategies in globalization. He was awarded the Kellogg Impact award by Kellogg MBA students for excellence and impact in teaching.

He serves on the Scientific and Technical Council for the Menus of Change, an initiative led by the Harvard School of Public Health and the Culinary Institute of America, to develop healthier and more environmentally friendly food choices. He is a former member of the board of the Education and Technology Committee to the Morton Arboretum. He was a board member of the Virginia Hispanic Chamber of Commerce, where he developed support programs for Hispanic entrepreneurs and worked with US senators on US Latino matters.

By Russell Walker, Ph.D.
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Russell Walker helps companies develop strategies to manage Risk and harness value through Analytics and Big Data. As Clinical Professor at the Kellogg School of Management of Northwestern University, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership.
He founded and teaches the popular Analytical Consulting Lab and Risk Lab, experiential classes, which bring Kellogg MBAs together with real-world projects in Analytics and risk evaluation.
His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage.
Dr. Walker consults with firms on the topics of Big Data and Analytics, Risk Management, and International Business Strategy.
Russell Walker can be reached at:
russell-walker@kellogg.northwestern.edu
@RussWalker1492
russellwalkerphd.com

Welcome to Big Data to Big Profits

As Clinical Professor at the Kellogg School of Management of Northwestern University, and former Associate Director of the Zell Center for Risk Research, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership.